Poverty — Study Notes

1. Introduction

Poverty is one of the most serious problems of the Indian economy. Despite six decades of planning and more than three decades of economic reforms, a large section of the Indian population continues to live below the poverty line, unable to meet even the minimum basic needs of food, clothing, shelter and healthcare. Poverty is not merely a matter of low income; it also includes deprivation in education, health, social status and access to public services.

In economic terms, poverty is a state in which a person is unable to obtain the minimum necessities of life. The study of poverty involves two questions: who are the poor? and how can poverty be eliminated? This chapter deals with the concept and types of poverty, the meaning and calculation of the poverty line in India, the extent and causes of poverty, and the government policies and programmes aimed at poverty alleviation.

Poverty in India is widespread in rural areas, where landlessness, caste discrimination and lack of opportunities keep millions in a vicious circle of low income, low saving, low investment and low productivity. Urban poverty, though smaller in numbers, is growing with migration and the informalisation of employment. Understanding the dimensions and causes of poverty is essential for designing effective policies.

2. Who are the Poor?

Poverty is a multidimensional concept, and its victims can be identified by several characteristics:

1. Landless labourers: In rural areas, the landless agricultural labourers are among the poorest, since they depend on seasonal and uncertain wage work.
2. Small and marginal farmers: Farmers with tiny holdings are poor because their output is insufficient to support their families.
3. Illiterate and unskilled workers: People without education or skills earn low incomes and have little mobility.
4. Scheduled castes, scheduled tribes and other backward classes: Socially disadvantaged groups suffer from discrimination and lack of assets, and are over-represented among the poor.
5. Women: Female-headed households and women workers are often among the poorest because of lower wages and limited opportunities.
6. Casual and informal workers: Workers in the unorganised sector - daily wage labourers, domestic workers, street vendors - live close to the margin.

3. Categories of Poverty

Poverty may be classified in several ways:

1. Absolute poverty: A condition of extreme deprivation, where a person cannot meet even the basic necessities of life - food, clothing and shelter. It is measured by the poverty line and the head count ratio.
2. Relative poverty: A condition in which some people are poorer compared to others in the same society, reflecting inequality. It is measured by comparing the incomes of the bottom sections with those of the top sections.
3. Rural poverty: Widespread in villages, arising from landlessness, low productivity, unemployment and lack of infrastructure.
4. Urban poverty: Arising in towns and cities from migration, lack of housing, unemployment and casual work.

Vicious circle of poverty: Poverty is self-perpetuating. Low income leads to low saving, low saving to low investment, low investment to low productivity, and low productivity back to low income. This circular process keeps the poor trapped in poverty, a condition described as the vicious circle of poverty.

4. The Poverty Line and its Measurement

The poverty line is the minimum level of income or consumption expenditure required to meet basic needs. In India, the poverty line was traditionally defined in terms of calorie requirements: a person is considered poor if his or her daily intake of calories is below a norm - about 2400 calories per person per day in rural areas and about 2100 calories in urban areas. Those whose consumption expenditure cannot support this calorie intake are counted as poor.

The measures used are:

1. Head count ratio (HCR): The proportion of the population below the poverty line, expressed as a percentage. It measures the incidence of poverty.
2. Poverty gap: The extent to which the average income of the poor falls short of the poverty line; it measures the depth of poverty.
3. Squared poverty gap: Gives more weight to the poorest of the poor, measuring the severity of poverty.

The official estimates of poverty in India are prepared by the Planning Commission (now NITI Aayog) on the basis of NSSO data on consumption expenditure. In 2011-12, the Tendulkar Committee methodology placed about 21.9 percent of the population below the poverty line. The absolute number of poor declined significantly over the decades, but in terms of numbers India still has one of the largest populations of the poor in the world.

5. Causes of Poverty in India

The major causes of poverty in India are:

1. Low economic growth: For a long period, the rate of growth of the economy was too slow to generate enough employment and income for the poor.
2. Population pressure: Rapid population growth added to the number of mouths to feed, spreading the limited output over a larger population.
3. Dependence on agriculture: The majority of the poor depend on agriculture, which is characterised by low productivity, seasonal unemployment and disguised unemployment.
4. Inequality of assets: The unequal distribution of land and other assets means that the majority of the poor own little or no productive assets.
5. Lack of education and skill: Illiteracy and lack of skills condemn workers to low-paid, unskilled jobs.
6. Social factors: The caste system and social discrimination pushed the disadvantaged groups into poverty and denied them opportunities.
7. Colonial legacy: The stagnation of the colonial period left the economy poor at independence.
8. Inadequate attention to employment: Development strategies did not give sufficient priority to generating productive employment.

6. Government Policies and Programmes for Poverty Alleviation

India has pursued both direct and indirect strategies to reduce poverty:

Indirect measures: These attack the causes of poverty. Rapid economic growth is the most important indirect measure, because growth creates employment and income. Special emphasis has been given to:

1. Expansion of education and health services, improving the human capital of the poor.
2. Growth of the agricultural and rural economy, especially through land reforms and the Green Revolution.
3. Public distribution system (PDS) to make food available at reasonable prices.

Direct measures: These transfer income and assets directly to the poor. The important programmes are:

1. Integrated Rural Development Programme (IRDP) - asset creation for the rural poor (now restructured).
2. National Rural Employment Guarantee Act (NREGA), 2005 (now MGNREGA): It guarantees 100 days of wage employment in a financial year to every rural household whose adult members volunteer for unskilled manual work. It is the largest employment guarantee programme in the world.
3. Prime Minister's Rozgar Yojana (PMRY) and the Swarna Jayanti Shahari Rozgar Yojana (SJSRY) - urban self-employment programmes.
4. Public Distribution System (PDS) and Antyodaya Anna Yojana - food security for the poor.
5. Indira Awaas Yojana - housing for the rural poor.
6. National Social Assistance Programme - pensions for the aged, widows and disabled.
7. MGNREGA, Pradhan Mantri Awas Yojana, and various other schemes launched in recent years.

7. Appraisal of Poverty Alleviation

The poverty alleviation programmes have had mixed results:

Achievements: The incidence of poverty has declined substantially over the decades. The head count ratio fell from over 50 percent in the early 1970s to about 22 percent in 2011-12. Literacy improved, and social infrastructure expanded.

Shortcomings: The rate of decline has been uneven across states; absolute numbers of the poor remain very large; the benefits of growth have not reached the poorest sections adequately; the programmes have suffered from corruption, leakage and poor targeting; and the quality of employment and human development (health, nutrition, education) remains a serious concern.

Quick Revision Tables

Mind Map

Important Diagrams (SVG)

Diagram 1: Vicious Circle of Poverty

Diagram 2: Head Count Ratio and Poverty Gap

Common Mistakes

1. Confusing absolute poverty with relative poverty; absolute poverty is about the inability to meet basic needs, while relative poverty is about inequality within a society.
2. Forgetting the calorie norms: about 2400 calories per day in rural areas and 2100 in urban areas for the traditional poverty line.
3. Believing poverty is only about income; it also involves deprivation in education, health and social status.
4. Assuming the head count ratio measures depth; it measures incidence (proportion below the line), while the poverty gap measures depth.
5. Forgetting that MGNREGA guarantees 100 days of wage employment to rural households for unskilled manual work.
6. Attributing all poverty to a single cause; poverty results from a combination of low growth, population pressure, inequality, illiteracy and social discrimination.
7. Thinking poverty has been eliminated; although the head count ratio has fallen substantially, the absolute number of poor remains very large.

Exam Tips

1. Define poverty and distinguish absolute from relative poverty.
2. Identify who are the poor - landless labourers, marginal farmers, SCs/STs, women and informal workers.
3. Explain the poverty line and the calorie norms of 2400 and 2100 calories.
4. Define the head count ratio, poverty gap and squared poverty gap.
5. List the causes of poverty: low growth, population pressure, agriculture dependence, inequality, illiteracy and social factors.
6. Distinguish indirect measures (growth, education, health) from direct measures (MGNREGA, PDS, pensions) of poverty alleviation.
7. Explain the vicious circle of poverty and how growth breaks it.

Conclusion

This chapter examined the problem of poverty in India - its meaning, types, measurement, causes and the policies to combat it. We saw that poverty is multidimensional, affecting not only income but also education, health and social status, and identified the landless, the marginal farmers, the scheduled castes and tribes, women and informal workers as the poorest groups. We distinguished absolute from relative poverty, explained the poverty line and the calorie norms, and studied the head count ratio, the poverty gap and the squared poverty gap. We analysed the causes of poverty - low growth, population pressure, dependence on agriculture, inequality, illiteracy and social discrimination - and the vicious circle that keeps the poor trapped. Finally, we reviewed the indirect measures (growth and human capital) and direct measures (MGNREGA, the public distribution system, and social assistance) of poverty alleviation and their mixed results. The development of human capital, which is central to breaking the cycle of poverty, is the subject of the next chapter.